EQUITY

12 Months Ended

Dec. 31, 2023

Equity [Abstract]

EQUITY

EQUITY

Common Stock

Farmer Mac has three classes of common stock outstanding:

•Class A voting common stock, which may be held only by banks, insurance companies, and other financial institutions or similar entities that are not institutions of the Farm Credit System. By federal statute, no holder of Class A voting common stock may directly or indirectly be a beneficial owner of more than 33% of the outstanding shares of Class A voting common stock.

•Class B voting common stock, which may be held only by institutions of the Farm Credit System. There are no restrictions on the maximum holdings of Class B voting common stock.

•Class C non-voting common stock, which has no ownership restrictions.

During 2023, 2022, and 2021, Farmer Mac paid a quarterly dividend of $1.10, $0.95, and $0.88 per share on all classes of its common stock. Farmer Mac's ability to declare and pay dividends on its common stock could be restricted if it fails to comply with applicable capital requirements.

Except for the period from March 16, 2020 to March 10, 2021, Farmer Mac has had a common stock repurchase program in place since third quarter 2015. On March 10, 2021, Farmer Mac's board of directors reinstated the share repurchase program on its previous terms (with a remaining authorization of up to $9.8 million in stock repurchases) and extended the expiration date of the program to March 2023. Farmer Mac did not repurchase any shares of its Class C non-voting common stock during that two-year period. In March 2023, Farmer Mac's board of directors renewed the share repurchase program on its

previous terms (with a remaining authorization of up to $9.8 million in stock repurchases) and extended the expiration date of the program to March 2025. Farmer Mac did not repurchase any shares of its Class C non-voting common stock during 2023. As of December 31, 2023, Farmer Mac had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $19.8 million under the share repurchase program since 2015.

Preferred Stock

The following table presents the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, and the Series G Preferred Stock (collectively referred to as the "Outstanding Preferred Stock") as of December 31, 2023:

Table 9.1

Name	Issuance Date	Issuance Cost		Shares Issued	Annual Dividend Rate(2)		Liquidation Value Per Share		First Possible Redemption Date(3)
Series C(1)	June 20, 2014	$	1,618,583	3,000,000	6.000	%	$	25.00	July 18, 2024
Series D	May 13, 2019	$	3,340,456	4,000,000	5.700	%	$	25.00	July 17, 2024
Series E	May 20, 2020	$	2,496,750	3,180,000	5.750	%	$	25.00	July 17, 2025
Series F	August 20, 2020	$	3,839,902	4,800,000	5.250	%	$	25.00	October 17, 2025
Series G	May 27, 2021	$	3,661,677	5,000,000	4.875	%	$	25.00	July 17, 2026

(1)The Series C Preferred Stock pays an annual dividend rate of 6.00% from the date of issuance to and including the quarterly payment date occurring on July 17, 2024, and thereafter, at a floating rate equal to three-month LIBOR plus 3.26%, which Farmer Mac expects will be converted to the Term Loan Secured Overnight Financing Rate published by CME Group Benchmark Administration, Ltd., plus a spread adjustment based on the tenor of the securities, if not redeemed prior to that payment date.

(2)Dividends on all series of Outstanding Preferred Stock are non-cumulative, which means that if Farmer Mac's board of directors has not declared a dividend before the applicable dividend payment date for any dividend period, such dividend will not be paid or cumulate, and Farmer Mac will have no obligation to pay dividends for such dividend period, whether or not dividends on any series of Outstanding Preferred Stock are declared for any future dividend period.

(3)Farmer Mac has the right but not the obligation to redeem.

The following tables present the quarterly dividends paid by Farmer Mac on its outstanding preferred during 2023, 2022, and 2021:

Table 9.2

	2023
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C	$	0.3750	$	0.3750	$	0.3750	$	0.3750
5.700% Non-Cumulative Preferred Stock, Series D	0.3563		0.3563		0.3563		0.3563
5.750% Non-Cumulative Preferred Stock, Series E	0.3594		0.3594		0.3594		0.3594
5.250% Non-Cumulative Preferred Stock, Series F	0.3281		0.3281		0.3281		0.3281
4.875% Non-Cumulative Preferred Stock, Series G	0.3047		0.3047		0.3047		0.3047

	2022
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C	$	0.3750	$	0.3750	$	0.3750	$	0.3750
5.700% Non-Cumulative Preferred Stock, Series D	0.3563		0.3563		0.3563		0.3563
5.750% Non-Cumulative Preferred Stock, Series E	0.3594		0.3594		0.3594		0.3594
5.250% Non-Cumulative Preferred Stock, Series F	0.3281		0.3281		0.3281		0.3281
4.875% Non-Cumulative Preferred Stock, Series G	0.3047		0.3047		0.3047		0.3047

	2021
	1st Quarter		2nd Quarter(1)		3rd Quarter		4th Quarter
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C	$	0.3750	$	0.3750	$	0.3750	$	0.3750
5.700% Non-Cumulative Preferred Stock, Series D	0.3563		0.3563		0.3563		0.3563
5.750% Non-Cumulative Preferred Stock, Series E	0.3594		0.3594		0.3594		0.3594
5.250% Non-Cumulative Preferred Stock, Series F	0.3281		0.3281		0.3281		0.3281
4.875% Non-Cumulative Preferred Stock, Series G	—		0.1693		0.3047		0.3047

(1)For second quarter 2021, dividend payment includes $0.1693 per share on the Series G Preferred Stock for the period from but not including May 27, 2021 (issuance date) to and including July 17, 2021.

Equity-Based Incentive Compensation Plans

Farmer Mac's Amended and Restated 2008 Omnibus Incentive Compensation Plan authorizes the grant of restricted stock units and SARs, among other alternative forms of equity-based compensation, to Farmer Mac's directors, officers, and employees. SARs awarded to officers and employees vest annually in thirds. Farmer Mac has not granted SARs to directors since 2008. If not exercised or cancelled earlier due to the termination of employment, SARs granted to officers or employees expire after 10 years from the grant date. For all SARs granted, the exercise price is equal to the closing price of Farmer Mac's Class C non-voting common stock on the date of grant. SARs granted during 2023, 2022, and 2021 have a weighted average exercise price per share of $135.12, $120.38 and $88.68, respectively. During 2023, 2022, and 2021, restricted stock unit awards were granted to employees, officers, and directors with vesting periods of one to three years.

The following tables summarize SARs and non-vested restricted stock unit activity for the years ended December 31, 2023, 2022, and 2021:

Table 9.3

	For the Years Ended December 31,
	2023			2022			2021
	SARs	Weighted- Average Exercise Price		SARs	Weighted- Average Exercise Price		SARs	Weighted- Average Exercise Price
Outstanding, beginning of year	132,163	$	75.82	130,409	$	66.10	116,417	$	57.16
Granted	16,761	135.12		18,432	120.38		28,575	88.68
Exercised	(22,972)	56.82		(16,678)	49.04		(14,583)	38.99
Canceled	—	—		—	—		—	—
Outstanding, end of year	125,952	87.18		132,163	75.82		130,409	66.10
Exercisable at end of year	87,378	73.15		83,054	63.12		72,106	52.85
	For the Years Ended December 31,
	2023			2022			2021
	Non-vested Restricted Stock Units	Weighted- Average Grant Date Fair Value		Non-vested Restricted Stock Units	Weighted- Average Grant Date Fair Value		Non-vested Restricted Stock Units	Weighted- Average Grant Date Fair Value
Outstanding, beginning of year	100,025	$	91.84	103,891	$	78.55	83,956	$	71.76
Granted	59,745	135.56		38,668	120.14		53,358	88.92
Canceled	(62)	88.68		(2,711)	97.44		(1,184)	79.82
Vested and issued	(45,355)	78.12		(39,823)	84.25		(32,239)	77.98
Outstanding, end of year	114,353	120.13		100,025	91.84		103,891	78.55

The cancellations of SARs and non-vested restricted stock units during 2023, 2022, and 2021 were due to unvested awards terminating in accordance with the provisions of the applicable equity compensation plans or award agreements upon directors' or employees' departures from Farmer Mac.  

Cash is not received from exercises of SARs or the vesting and issuance of restricted stock units. During 2023, 2022, and 2021, the reduction of income taxes payable as a result of the deduction for the exercise of SARs and the vesting of restricted stock units was $1.7 million, $1.2 million, and $0.9 million, respectively.

During 2023, 2022, and 2021, Farmer Mac recorded a net decrease to additional paid-in capital of $3.1 million, $1.9 million, and $1.3 million, respectively, related to stock-based compensation awards.

As of December 31, 2023, Farmer Mac had no stock options outstanding. The following tables summarize information about SARs and non-vested restricted stock units outstanding as of December 31, 2023:

Table 9.4

SARs:
	Outstanding		Exercisable		Vested or Expected to Vest
Range of Exercise Prices	SARs	Weighted- Average Remaining Contractual Life	SARs	Weighted- Average Remaining Contractual Life	SARs	Weighted- Average Remaining Contractual Life
$25.00 - $39.99	18,735	1.6 years	18,735	1.6 years	18,735	1.6 years
40.00 - 54.99	—	0.0 years	—	0.0 years	—	0.0 years
55.00 - 69.99	3,381	3.3 years	3,381	3.3 years	3,381	3.3 years
70.00 - 84.99	39,642	5.8 years	39,642	5.8 years	39,642	5.8 years
85.00 - 99.99	29,001	6.6 years	19,476	6.3 years	29,001	6.6 years
100.00 - 114.99	—	0.0 years	—	0.0 years	—	0.0 years
115.00 - 129.99	18,432	8.2 years	6,144	8.2 years	18,432	8.2 years
130.00 - 144.99	16,761	9.3 years	—	0.0 years	16,761	9.3 years
	125,952		87,378		125,952
Non-vested Restricted Stock Units:
	Outstanding		Expected to Vest
Weighted- Average Grant-Date Fair Value	Non-vested Restricted Stock Units	Weighted-Average Remaining Contractual Life	Non-vested Restricted Stock Units	Weighted-Average Remaining Contractual Life
$80.00 - $94.99	30,182	0.3 years	30,450	0.1 years
95.00 - 109.99	219	0.3 years	219	0.3 years
110.00 - 124.99	24,779	1.3 years	24,779	1.3 years
125.00 - 139.99	56,194	2.3 years	56,194	2.3 years
140.00 - 154.99	2,979	2.3 years	2,979	2.3 years
	114,353		114,621

As of December 31, 2023 and 2022, the intrinsic value of SARs, and non-vested restricted stock units outstanding, exercisable, and vested or expected to vest was $35.0 million and $16.3 million, respectively. During 2023, 2022, and 2021, the total intrinsic value of SARs exercised was $2.4 million, $1.1 million, and $0.9 million, respectively. As of December 31, 2023, there was $7.7 million of total unrecognized compensation cost related to non-vested SARs and restricted stock unit awards. This cost is expected to be recognized over a weighted-average period of 1.9 years.

The weighted-average grant date fair values of SARs and restricted stock unit awards granted in 2023, 2022, and 2021 were $114.68, $91.94, and $65.48 per share, respectively. Under the fair value-based method of accounting for stock-based compensation cost, Farmer Mac recognized compensation expense of $6.8 million, $4.6 million, and $4.3 million during 2023, 2022, and 2021, respectively.  

The fair value of SARs was estimated using the Black-Scholes option pricing model based on the following assumptions:

Table 9.5

	For the Year Ended December 31,
	2023	2022	2021
Risk-free interest rate	4.1%	1.9%	0.9%
Expected years until exercise	6 years	6 years	6 years
Expected stock volatility	36.6%	37.4%	39.1%
Dividend yield	3.3%	3.2%	4.0%

The risk-free interest rates used in the model were based on the U.S. Treasury yield curve in effect at the grant date. Farmer Mac used historical data to estimate the timing of option exercises and stock option cancellation rates used in the model. Expected volatilities were based on historical volatility of Farmer Mac's Class C non-voting common stock. The dividend yields were based on the expected dividends as a percentage of the value of Farmer Mac's Class C non-voting common stock on the grant date.

Because stock will be issued upon the vesting of restricted stock units regardless of the stock price, expected stock volatility is not considered in determining grant date fair value. Restricted stock unit awards also accrue dividends which are paid at vesting. The weighted-average grant date fair value of the restricted stock units awarded in 2023, 2022, and 2021 was $135.56, $120.14, and $88.92 per unit, respectively, which is based on the closing price of Farmer Mac's Class C non-voting stock on the date granted.

Capital Requirements

Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement. As of both December 31, 2023 and 2022, the minimum capital requirement was greater than the risk-based capital requirement. Farmer Mac's ability to declare and pay dividends could be restricted if it fails to comply with applicable capital requirements.

As of December 31, 2023, Farmer Mac's minimum capital requirement was $862.6 million and its core capital level was $1.5 billion, which was $589.4 million above the minimum capital requirement as of that date. As of December 31, 2022, Farmer Mac's minimum capital requirement was $805.9 million and its core capital level was $1.3 billion, which was $516.9 million above the minimum capital requirement as of that date.

In accordance with a rule of the Farm Credit Administration ("FCA") on Farmer Mac's capital planning, and as part of Farmer Mac's capital plan, Farmer Mac has adopted a policy for maintaining a sufficient level of Tier 1 capital (consisting of retained earnings, paid-in-capital, common stock, and qualifying preferred stock) and imposing restrictions on Tier 1-eligible dividends and any discretionary bonus payments in the event that this capital falls below specified thresholds.